Emerging-market consumer companies are valued at the most expensive levels on record just as surging food and energy costs curb household spending from Sao Paulo to Shanghai.
Shares in the MSCI Emerging Markets Consumer Discretionary Index traded at a 15-year high of 2.6 times net assets last week, data compiled by Bloomberg show. Wynn Macau Ltd, owned by billionaire Stephen Wynn’s casino company, fetched a record 28 times forecast profit. Mahindra & Mahindra, India’s biggest sport-utility vehicle maker, has a price-to-book ratio 53 per cent higher than global peers, while Brazil’s Cia. Hering, producer of Hering brand apparel, commands a 15 per cent premium.
Economic growth and supply shortages sent a United Nations gauge of food prices to a record last month, cutting the buying power of 2.8 billion people in Brazil, Russia, India and China who spend 19 per cent of their income on groceries, compared with 6 per cent in the US, Euromonitor International data show. Consumer shares were the second-worst performers among 10 industries in periods of rising inflation since 2001, according to Morgan Stanley.
“Inflation has really thrown a curve ball,” Jacob De Tusch-Lec, who helps oversee about $17 billion as a London-based money manager at Artemis Investment Management, said in a January 14 telephone interview. “With food prices and energy prices being so high — and it’s a big portion of consumer spending in Asia — that could put a bit of a stop to that story.”